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Johannesburg – It seems investors on the JSE will end the year with a very modest return, if the current downward trend on the market continues for the rest of the year – and there is nothing on the horizon indicating that its end is near.All the major indices again opened sharply lower yesterday, before recovering somewhat to modestly lower levels by noon as bargain hunters exploited opportunities.

This has however been the pattern for the last few days. The market drops sharply at the beginning in line with world markets, then recovers somewhat to drop even further towards the end of the day.

At noon yesterday the All-share index was 0.33 percent lower at 47, 240 points and the Top 40 index traded 0.38 percent softer at 41, 596 points. The biggest loser was the Industrial index which lost 0.85 percent.

At the current level of just above 47,000, the All-share index is now about 5,000 points (or almost 10 percent) lower than the high reached in the third quarter this year, and some forecasters are saying that even cash might earn a better return than stocks this year.

And the indications for the rest of the year are not good. The oil price dropped even further and Brent is now trading at below $60 per barrel, more than $55 weaker than the high of $115 per barrel reached earlier this year.

News that the Chinese manufacturing sector is contracting is a further indication that the weak demand for oil will remain in place  for some time.

Although a lower oil price is good news for inflation and economic growth in the  long run, even American investors are getting nervous about the devastating effect lower oil prices will have on the economies of developing oil producing countries such as Russia, where the rouble has dropped to unprecedented levels.

The major companies listed on Wall Street do business all over the world and they will be affected by the depressed economic circumstances worldwide, despite indications of a strong economic recovery in America.

“If China’s manufacturing is not growing, it suggests the rest of world is not consuming as much,” Mike van Dulken, head of research at Accendo Markets, told AFP.

China’s manufacturing activity worsened in December with HSBC’s purchasing managers’ index hitting a seven-month low, the bank said, signalling more weakness in the world’s second-largest economy and top energy consumer.

The preliminary PMI for the month came in at 49.5, below the break-even point of 50 dividing expansion and contraction. Bad news about Russia and China is also not good for the sentiment towards emerging markets, of which South Africa is an important member.

The market is also waiting for new signals from America’s central bank, the Federal Reserve, on future movements of American interest rates. The bank’s market committee is meeting this week.

The rampant dollar is one of the reasons for the slump in oil and commodity prices, and any sign that the US interest rates might rise soon will strengthen the dollar even further to the detriment of commodity producers such as South Africa. The influence of weaker commodity prices on resources shares has been devastating. The Resources 10-index, which traded at 60,000 in the third quarter, has lost a third of its value and is now below 40,000.

The resources sector did however recover somewhat yesterday morning and at noon was 0.71 percent higher at 39,862.

Major resources shares such as Anglo American and BHP Billiton both reached new 52-week lows in early trading before bargain hunters stepped in. Anglo was at one stage at a new low of R204.36, but at noon it traded 1.3 percent higher at R207.05. BHP Billiton was also at its low of R237.73 before it recovered to R140.01, 1.17 percent stronger than on Monday.

Iron ore producer Assore lost another 1.21 percent yesterday morning to trade at a new low of R140.77.

This means that the share is now almost 60 percent lower for the year after it reached a 52-week high of R450.31 in March this year. All those losses took place in the last three months.

In the industrial sector Naspers [JSE:NPN], which is strongly linked to the Chinese economy, lost 1.85 percent yesterday morning to R1,324.99.– Fin24.